The State of the Not-for-Profit Theatre’s Finances
The long-running financial struggle of the American not-for-profit theatre continues unabated. As can be seen in my analysis entitled A Close Reading of the Theatre Facts 2017 Survey, the theatres that participated in five consecutive annual fiscal surveys of the professional not-for-profit theatre in America reported both unhealthy financial condition and unsatisfactory financial performance, even though this group includes some of the largest and most prestigious theatres in the United States. I invite you to read this detailed essay.
What Ails the Not-for-Profit Theatre?
The poor financial state of the not-for-profit theatre arises from four fundamental causes. First is the failure to attract new patrons in sufficient numbers to offset an aging audience whose size is naturally diminishing. Second, theatres must contend with the ever-increasing cost of live performance that cannot be offset.[1] Third is the failure to obtain contributed income for regular operations sufficient to offset the negative impact of declining audiences and higher costs. Together, these three problems result in chronic operating deficits. Fourthly, the misallocation of scarce resources to buildings and endowments when combined with operating deficits results in negative working capital, smaller scale productions and increased pressure on artistic ambition.
Not-for-profit theatres can better focus on these four problems and thereby substantially improve operating results and liquidity if management and boards jointly define and management thereafter creates:
more informative and actionable financial reports and
strategies of substance.
Improved performance report information and improved strategies will foster operating surpluses and more resources for artistic purposes.
[1] This proposition was first articulated in The Performing Arts, The Economic Dilemma: A Study of Problems Common to Theater, Opera, Music and Drama by William J. Baumol and William G. Bowen in 1966.